Md. Senate panel OKs bills on insurance insolvencies

February 28, 1991|By David Conn | David Conn,Annapolis Bureau of The Sun

ANNAPOLIS -- A package of bills intended to protect Maryland citizens against insurance insolvencies eased through a Senate committee yesterday with hardly a hitch.

HTC But because the bills, submitted on behalf of Gov. William Donald Schaefer, were amended slightly by the Senate Finance Committee before they were passed, the differences will have to be worked out with the committee's counterpart in the House, the Economic Matters Committee.

The bills would:

* Give Maryland's insurance commissioner broader authority to take control of a company threatened with insolvency and increase the examinations of insurers from at least one every five years to once every three years.

* Increase the amount of money each insurer would have to hold as capital, by as much as three times the current levels in some cases. The bill would allow insurers already doing business in Maryland to wait 10 years to meet the higher capital requirements.

* Require the regulation of managing general agents. These are independent and currently unregulated businesses that are authorized by insurers to do much of the underwriting and sales work of the insurers.

The House committee killed a companion bill that would have required the top officers of insurance companies to notify the state when the company becomes financially impaired to the point where it can't pay its bills within 30 days after they come due.

Although some of the language of the bill was placed in another bill that passed, the Economic Matters Committee rejected the idea of a notice requirement for insurance chief executive officers, and that could be a problem when the two sets of bills are reconciled between the two houses.

The House committee has taken no action on a bill to require insurance company officials to notify the state when they believe a customer has committed fraud against the company and to require companies to come up with a plan to fight consumer fraud, partly because it wants to address another bill aimed at reducing insurance fraud.

Only one bill, increasing the capital requirements, has passed the full House, but most of the others will reach the House floor this week. Since the two committees will have a chance to look at each other's bills, they might not have to form a conference committee late in the session to iron out the differences.

"These bills are aimed at protecting policyholders and the public from solvency problems with insurers," said Bruce P. Martin, a legislative aide to Mr. Schaefer.

He noted that the bills would help Maryland receive accreditation from the National Association of Insurance Commissioners. Without that seal of approval, achieved by only two states, Maryland's examinations of insurers might not be recognized by other states, which then might decide to conduct their own reviews. That could persuade some insurers to become chartered in another state, Mr. Martin said.

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